One of the sessions at the just concluded IMF/World Bank Group Annual Meetings is how developing countries can raise their tax base in order to generate revenue for meaningful development of infrastructure. The panelist examined issues around tax evasion by corporate bodies, especially in extractive industry. They came to the conclusion that many companies in the extractive industry in Africa do not pay adequate tax. Also the tax base is weak and many citizens do not pay their taxes.
In Nigeria, available data suggests that tax from non-oil revenue yielded between 6.0 percent and 6.5 percent of GDP from 2007 to 2011. In contrast, the range for oil tax revenue was far wider at 12.7 percent in 2009 and 26.5 percent in 2008. In a recent workshop in London on tax development, one prominent think-tank in the development field argued that Nigeria is the only country in the world where illicit financial flows, which it estimated at about 10 percent of GDP, are larger than tax revenues levied outside the natural resources industries. This claim, according to reports, emerged at a briefing held in London on “Tax and Transparency after the G8: Nigeria and Beyond”. The three panelists were senior officials in the tax authorities in Nigeria, a partner in the Lagos operation of a leading accountancy firm and a research fellow at a UK-based NGO.
Nigeria top government functionaries are not interested in the development of tax base for the benefit of the people, but for their own benefits.
Nigerians are not averse to paying tax; in fact they will gladly pay if the government can show what the tax is used for. Tax to many Nigerians is an avenue for government functionaries to make additional income for themselves. The revenue from tax is deployed to serve self interest. Every Nigerian has decried the poor provision of social infrastructure in the most populous Black Country.
Even with billions from oil revenue annually, governments across the country have not been able to show Nigerians what the money has been used for. With minister like Stella Odua, who uses public funds to secure her personal protection, Nigerians will be hard pressed to pay tax as at when due. In other parts of the world, public servants render service to the people, who pay for their stay in such offices. But it is not the same in Nigeria. Citizens pay to be oppressed by their leaders. While in Britain, the Queen drives herself, in Nigeria millions are spent on fleets of cars, choppers, airplane for the president, his wives, governors and other top government functionaries.
It is in Nigeria that businesses are shut for hours because the president is passing by. It is in Nigeria that the air space is shut because of VIP movement with hours of man labour wasted. While coming from Washington, we stopped over in London to see a friend who owns a house in London. By his streets were local government workers who clean up the area on daily basis. When asked, our guest said that they are local government workers who clean up the environment. He said that residents are made to pay tax and on the payment of that tax services are rendered.
He pointed to us phone boots by the road side that motorist use to call for help when they have a break down, a service he said they enjoy by payment of MOT. He also told us that while at home, should there be any health emergency, you can just make a call and an ambulance from the government will be at your service at no extra charge. How will those who live in such environment not pay their taxes? The British prime minister’s office does not own fleet of jets, but here the president has several at his beck and call.
Tax in Nigeria is for a different reason. In Lagos for instance, the government collects land use charge from all houses built in Lagos. When it comes to service delivery, that is when the state government knows that some areas are federal land and it is the Federal Government that should build roads in those areas. From the individuals and corporate bodies from which these taxes are collected, they build their own estate roads; provide their boreholes, employ private securities. But at the beginning of each year, Lagos State tax officials surface with a threat of sealing up the buildings. Once land use charge money is collected for that year, they disappear to thin air.
On the road, they make motorist pay for MOT, but when the same motorist run into difficulties on the road with his vehicle, instead of assisting the same person they earlier collected taxes from, they tow the vehicle to their park and make him pay N25, 000. Yet, again and again they come up with plate number change for which individual motorist are made to pay for. In the last four months, many motorists in Lagos have paid for the new driver’s licence, but to get captured in their center has become a mission impossible.
When, Governor Babatunde Fashola assumed office in Lagos, he gave hope to many. He was called action governor, example of how governance should be. In the first four years, he pretended to be an action governor, but in this his second term in office, he has gone to sleep and has been sleep walking the Lagos streets. He is now not an example to any body.
Several corporates have accused some state government agencies of forcefully extorting money from them to increase their Internally Generated Revenue, IGR. If Nigeria is to continue to attract foreign investments, diversify the economy, and create more jobs and become one of the top 20 economies of the world by 2020, the tax system must be right. That means multiple taxation is particularly harmful to the economy because it increases the cost of doing business in Nigeria, discourages local trade and investment and also gives a negative perception of the Nigerian business environment to foreign investors.
Some states have as many as 97 different taxes, levies and charges that are imposed on businesses. This is simply not economically.
A recent World Bank Report showed that for every N100 that businesses had to pay in taxes, they paid about N35 in compliance costs, saying that this is a waste of capital that could be re-invested in these businesses to grow them and create more jobs for the economy.
Lagos State has 8.1 million tax paying adults on its database, yet only three million are captured in its tax net. If its record was replicated across the country, which it is not, then 20 million adults have escaped the net. The challenge is to develop the culture of compliance. Government at all levels has to overcome a major credibility gap. This was evident from the FGN’s attempt to remove the fuel subsidy in January 2012. It had to step back and accept a compromise because the population at large doubted whether the resulting savings would be deployed for the public good. Government functionaries should stop stealing the people’s money and use available funds for the benefit of all. That is when Nigerians will be willing to pay their taxes as and at when due.
